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Promoting Inclusive Markets and Financial Systems

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Banking the Unbanked: One Savings Group at a Time

by on Feb 29, 2016  |  posted in Financial Inclusion, Savings  |  2 Comments

This blog post originally appeared on the CARE International Blog. 

We are pleased to share it here with the SEEP Community.

An extract from the State of Linkage Report An extract from the State of Linkage Report

In some parts of the world people used to think it was too difficult to bank the poor. Findings from last week’s webinar launch of the new State of Linkage Report have dispelled that myth.

The report, commissioned by Barclays, CARE International and Plan UK, details the extent that organisations are actively linking poor people to formal financial products and services. The report says:

  • 106 savings and credits products are currently offered to savings groups
  • 95 financial service providers are offering formal financial services to informal savings groups
  • Five of these financial institutions—Barclays, Bank of Africa, Kenya Commercial Bank, Opportunity International Bank and FINCA—offer products in multiple markets
  • 27 countries where savings groups are linked to formal financial services
  • Nearly two-thirds of all linkage products identified are found in sub-Saharan Africa, while Asia-Pacific and Latin America account for 29 per cent and 6 per cent of the linkage products, respectively.

The report provides for the first time a global mapping of "linkage" activity—the process through which informal savings groups are able to access products and services from formal financial service providers. The report identifies where linkage is taking place, what organisations are currently linking, and the kinds of financial products being offered.

Commercial opportunity or corporate social responsibility?

A question raised during the webinar launch has got me thinking. Are financial institutions viewing linkage as a commercial opportunity or are they sticking to their corporate social responsibility obligations to bank the poor? What is exciting to read from the report is that nearly two-thirds of the products identified are offered by retail banks, lending credibility to the hot topic that there is a solid business case for banks to develop products and services for informal savings groups.

Information presented in the report’s Linkage Table shows many examples where banks are seeing it this way and seriously investing in linkage activity, for example—Barclays Uganda. In Uganda, Barclays have partnered with NGO Grameen Foundation Uganda and the mobile network operator Airtel Uganda to enable informal savings groups to link their mobile money wallet to a Barclays savings account—effectively overcoming geographic obstacles to accessing a branch for those living remotely.

What’s in it for the banks?

According to the report, there is a US $116 billion per year opportunity for financial institutions if they banked the 2 billion currently unbanked people. The report lends hope that all those engaged in linkage activity, namely financial institutions, mobile operators and non-profits, can now better understand the scale of linkage activity taking place, perhaps compare products with their competition and hopefully identify opportunities to better service the banking needs of the world’s poorest. This also supports the CARE and Accenture Within Reach report findings that banks should have a vested interest in serving under-banked consumers in emerging countries, stating it represents a US $380 billion opportunity.

Crucially, how can linkage help the poor?

Put simply, enabling informal savings groups to link with financial institutions will enable the poor to have first time access to relevant, appropriate, safe financial products. The poorest currently face the greatest barriers to financial inclusion, including low and unpredictable incomes, living in remote areas away from branches, and a lack of identification, all of which inhibit them from accessing financial services.

As a work-around, many people in poor communities chose to pool their money by joining an informal, community-based savings group, such as a Village Savings and Loan Association (VSLA). There is well documented success of VSLAs and the benefits it brings members, such as enabling members to grow their collective savings, and access it as needed to create businesses, build assets and reduce the effects of shocks such as droughts (see CARE, Barclays and Plan’s Breaking the Barriers to Financial Inclusion report).

It is also clear that the poor can experience even greater outcomes when matured savings groups are linked to formal financial services. According to the Breaking the Barriers report, the average VSLA member saves US $58 per year, and once linked to a bank the average savings per member increases by between 40 and 100 per cent. That means that through linkage, there should be greater protection from hardships, more inclusive economic empowerment and more pathways out of poverty.

What next?

There is still much work ahead of us to get financial institutions investing in linkage activity. This report should be used by financial services to be more effective in their responsible linkage by learning where linkage is happening (and not happening) and what formal products are presently in demand from group savers. Building on this work is the CARE International, Barclays and Plan UK Linking for Change Savings Charter, which has generated a commitment from 29 leading banks, NGOs, governments and technology providers to share learnings and reach out responsibly and at scale to provide formal financial services to informal savings groups. Follow this link to find out more about the Charter.

Fiona Jarden is CARE International's Financial Inclusion Advocacy and Policy Advisor. Fiona’s experience in financial inclusion began in remote Australian Aboriginal communities, where she worked for a number of years to address barriers families faced through financial exclusion and generational poverty. She later went on to lead financial inclusion programs for these same communities and led on major projects with Westpac Bank to strengthen their ability to link with poor customers.


Great piece, Fiona. Curious if you’ve read or heard of any savings group traction – and linkage – in the U.S.? I’ve heard a smattering (via Jeffrey Ashe), but not much tangible activity.

Akena Louis says:
Mar 03, 2016

wonderful and nice to read report on the success of linkage/financial inclusion (case of Uganda)

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